Prime Minister Shinzo Abe has given the go-ahead to allowing the nation's consumption tax rate to be raised from the current 5 percent to 8 percent next April, sources said.
The hike will mark the first increase in the nation's consumption tax rate in 17 years.
On Sept. 20, Abe met with Finance Minister Taro Aso, who also serves as deputy prime minister, at the prime minister’s office to discuss cutting the effective corporate tax rate, a stimulus measure for when the consumption tax hike takes effect.
At the meeting, they concluded that the consumption tax hike will not hamper the government's efforts to bail the nation out of its long state of deflation, the sources said. A precondition for the tax hike to take effect is an "improvement in economic conditions."
The prime minister is expected to make the official announcement on the increase on Oct. 1, after the Bank of Japan’s closely watched “tankan” survey of corporate sentiment in September is released.
The last hike in the consumption tax rate came in April 1997, when the administration of Prime Minister Ryutaro Hashimoto raised it from 3 percent to 5 percent. The government, led by the Democratic Party of Japan, passed the legislation in August 2012 to raise the consumption tax rate in stages, to 8 percent in April 2014 and 10 percent in October 2015.
Abe, who became prime minister in December when the Liberal Democratic Party returned to power, wanted to consult with experts and examine economic indicators before deciding on allowing the first consumption tax hike to kick in.
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